Inside The Secret eBay Lab Changing Real-World Shopping

Inside The Secret eBay Lab Changing Real-World Shopping

A look at how MultiTaction's touch screen, collaboration technology is changing the way they work.

America’s most prominent technology firms have all built reputations for futuristic thinking through secret, ancillary Silicon Valley labs.

Google GOOGL -1.71% has GoogleX, its facility dedicated to self-described “moonshots” like internet-projecting balloons and self-driving cars. Seattle-headquartered Amazon.com AMZN +6.47% maintains a Cupertino, Calif. skunkworks Lab126, which guarded products like the Kindle e-reader and the company’s first smartphone. At Apple AAPL -2.23%, Steve Jobs created “black” labs, secret test facilities unknown to some employees where iPhone prototypes were evaluated.

When one thinks of eBay EBAY -2.40%, however, the mind does not often have wild visions of engineers building futuristic devices in dimly lit, heavily fortified rooms. For the most part, the San Jose based e-commerce company has lacked the classified lab mythos of its tech peers, proceeding through the years with the same reputation its had since the dot-com bubble as an online auction site.

As it prepares for its split with PayPal in 2015, eBay is contemplating its next move. Soon to be without its lucrative payments arm, the company is finding more and more that its future not only lies online but also in the world of physical retail, which still accounts for more than 90% of all commerce. That’s been the impetus for the company’s retail innovation lab in the San Jose suburb of Campbell, where a small team of eBay employees has been tasked with developing hardware that could change the future of shopping.

Last month that team revealed its partnership with Rebecca Minkoff, helping the contemporary fashion designer open her first boutiques in New York and San Francisco with technological developments such as “smart” dressing rooms that beckon more to Star Trek than SoHo. That was followed by the launch of connected kiosks, giant iPhone-like mall directories, at Simon Property Group's SPG -3.31% Stanford Shopping Center in Palo Alto, Calif. that shoot users maps and allow for interactive browsing.

While few would expect eBay to push into hardware, the company’s early experiments suggest that it could yet aid retailers in merging offline and online commerce and finding better shopping experiences through connected devices. To that end, eBay has separated its lab from its main headquarters, nestling it in downtown Campbell near the public library and historical museum, to better focus on its projects.

eBay Head of Retail Innovation Healey Cypher (left) and Vice President of Innovation and New Ventures Steve Yankovich at the company's lab in Campbell, Calif. (Photo: Ryan Mac/Forbes)

“Initially we didn’t tell anyone we had this space or anything we were working on,” said Healey Cypher, eBay’s head of retail innovation, as he pointed to blinds that are usually down to prevent anyone from looking in. They were drawn during my visit earlier this month to give light into a place that its 17 workers call the “Bat Cave.”

“Even the people that shared the building with us weren’t allowed in,” he continued, as we walked around the 3,000 square-foot space.

Thus far, eBay’s approach to its self-proclaimed “retail innovation” has come mainly in putting touch screens in physical stores, effectively placing interactive televisions in front of consumers to help them navigate spaces, find goods or order items. The Campbell lab is littered with the skeletons of experiments past including a hefty touchscreen display developed for Toys’R'Us in 2012 that Cypher and team tested by ramming with shopping carts. There’s mock fitting rooms developed for the Minkoff partnership that have mirrors that pop up with style guides and sizing, while the main eye-catcher is a $300,000, 17-foot “iWall.” Ordered from a Finnish firm called MultiTaction, it reads and reacts to instantly to human hands just as an iPhone responds to fingertips, and is “something we’re testing” smiles Cypher.

EBay declined to disclose how much they’ve spent on its Campbell lab, but Cypher said it’s grown in focus for the company since he started the team more than two years ago. A well-dressed 30-year-old who sometimes models in his own product videos, he joined eBay after the company acquired local shopping site Milo.com in 2010. After bouncing around to different teams, Cypher was tasked with heading a team to build retail hardware for physical stores, eventually commandeering an eBay conference room across from CEO John Donahoe’s office to build his creations. His team, along with members of PhiSix, a clothes-sizing startup that was acquired by eBay in February, moved to the Campbell space earlier this year.

Cypher’s boss, Vice President of Innovations and New Ventures Steve Yankovich, explained that the move was made to preserve the nimbleness of the lab, invoking the trite trope of a startup within a larger corporation. Still, he has a bit of a point. If you’re able to look past the fridge stocked with Bud Light and bespoke wooden desks topped by Macbook Airs, you start to understand that the retail innovation lab is eBay’s way of branching out as its marketplace business continues to show stagnated growth. The company has increased product development spending in each of the last eight quarters,dropping $511 million last quarter on research, development and quality testing to explore new niches.

“This is a way for eBay to remain not only relevant, but also [address] how do we progress?” said Yankovich. “How do we do more? How do we evolve appropriately in 2015 going into being a standalone company?”

While the lab efforts are hardly a concession to critics of its online business, eBay executives acknowledge that perhaps the most growth may come in bridging the gap to physical retail. Research firm eMarketer reported that e-commerce will account for only 5.1% of $22.5 trillion in global retail in 2014.

“The fact that eBay created their labs group shows at least some discernible shift of focus toward physical retail by technology companies big and small,” said Mikael Thygesen, Chief Marketing Officer of Simon. To date, the experimental, all-weather connected kiosk at Stanford Mall has produced 40,000 interactions, increasing foot traffic to stores, while also providing data on where and what customers are looking for.

Rebecca Minkoff CEO Uri Minkoff says ready-to-wear clothing sales have doubled following the launch of their stores last month that featured eBay-customized connected walls and fitting rooms. He attributes that growth directly to small details in the technology that have improved the shopping experience for women, from the ability to request attendants by tapping fitting room mirrors to RFID readers in dressing rooms that can relay what styles and sizes are being tried by customers.

While Rebecca Minkoff purchased the hardware from eBay and licenses the software (Nordstrom is also now piloting the fitting rooms), it’s been very much a partnership says Uri Minkoff. Two of the Minkoff test fitting rooms sit at the entrance to the Campbell lab and are constantly being tinkered. Case in point: one of the earliest mirrors were unflattering to the figures of a pair of Rebecca Minkoff assistants so Cypher and his team were forced to find a different reflective display.

It’s constant experimentation, says Cypher, who declined to get too much into the lab’s future plans. Some ideas being swirled around include Microsoft Kinect-like devices that can map foot traffic. Another project possibility is one that features RFID tags sewn into clothing that could allow users to buy items with their phones without talking to a sales representative. Nothing has been confirmed yet.

As eBay nears its 20th birthday next year, it seems odd that the company that once championed the rise of online commerce is now helping retailers grow their real world presences. Cypher acknowledged the irony, but not before underlining the potential for eBay’s foray into the physical.

“The future of touch in retail is limitless,” says Cypher. “What we’re doing is the future of retail.”